The Morning Update

The US$ firms, Oil prices fall, equity markets are down, while US yields rise as Interest rate concerns impacts risk-sentiment. Oil prices drop 2% and global equity markets retreat after Fed Bostic said that the Federal Reserve is likely to have one more interest rate rise in store, as the central bank continues to battle inflation. Markets are pricing in a +85% chance the Fed will hike interest rates by 25bps at its May policy meeting. In Europe, ECB officials are also wary of inflation and are suggesting that interest rates need to continue rising. The UK saw March inflation data beat estimates, increasing expectations that the BoE will continue its hiking policy. Today sees more US bank earnings, the US Fed's Beige Book, ECB Schnabel, BoE Mann speeches and CAD Housing Starts to help provide intraday direction.

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In Other News. UK residential rents rise for 20th successive month. India overtakes China as the World's most populous country. Record EU gas storage raises hopes of cutting Russian dependence. Core eurozone inflation edges up in March keeping ECB on alert. South Korea Yoon opens door for possible military aid to Ukraine. Glencore raises pressure on Teck Resources with promise of sweeter bid. Rival fractions defy ceasefire, Japan plans evacuation of its citizens.

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In Currency News. The US$ rebounds on hawkish rate comments, while the GBP holds steady after stronger than inflation data raises the prospect of further BoE rate hikes. Hungary's Forint slips off 1-year highs after Central Bank comments of loan rate cut. CNY & Asian currencies weaken 0.3% on average vs US$. Trading currencies are under pressure with AUD, SEK & CHF are down 0.4%, NZD & MXN weaken 0.5%, JPY & ZAR fall 0.65% and NOK tumbles 1% vs US$.

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Oil prices weaken 2% as the fear of higher global interest rates off set risk-on sentiment from positive Chinese Data. C$ weakens as the US$ rebounds after Fed Bolstic hawkish comment of further Fed rate hikes. Domestically Canadian inflation eased to 4.3% in March vs 5.2% in Feb which suggests that the BoC unlike its peers is expected to keep its interest rate on pause. Going forward with prospect of oil prices lower and expectations of widening interest divergence between the BoC vs Fed & ECB it's likely to keep pressure on the loonie in Q2. Today alongside the US Fed Beige Book, focus will be on CAD Housing Starts, Industrial Product Price & Raw Materials Price Index to help provide intraday direction. Support is at 1.3370 while resistance resets to 1.3480.

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EUR/CAD holds steady intraday, but CAD holds near yearly lows vs Euro down over 9% over 6-months. The prospect of further ECB hikes vs BoC holding steady is expected to keep pressure on the CAD. Support holds at 1.4625 while Resistance remains at 1.4800.

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EUR bearish tone continues as the single currency slips below 1.0950 vs US$. In the absence key economic data, the increasing risk-averse market environment continues to add pressure to Euro and is helping strengthen the US$. ECB chief economist Lane & ECB Schnabel will be speaking today, but markets expect the policymakers will continue to maintain their hawkish comments, with markets expecting 25 to 50 basis point hike at the upcoming interest rate decision meeting. Today US earnings and the Fed beige book could have further impact on intraday market direction.

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GBP/EUR strengthens after UK inflation stayed above 10% in March which will keep pressure on the BoE to continue to increase interest rates to continue its fight on interest rates. Support shifts to 1.1300 while Resistance holds at 1.1425.

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GBP extends gains its peers and holds steady vs US$ as hot UK CPI data supports the pound. The pound recaptures 1.2400, but is off its daily highs of 1.2472 as souring risk sentiment boosted the safe-haven US$. UK office for National Statistics today showed annual CPI declined slightly to 10.1% in March. The inflation level came in stronger than expected of 9.8% and additionally core CPI held steady at 6.2% while Retail Price Index hit 13.5% vs expected 13.3%. Expectations remain high that the BoE will need to continue its hiking strategy in an effort to tackle the stubborn high UK inflation levels. Today focus will be on the Fed Beige Book and BoE Mann speech for intraday direction. Support resets to 1.2365 while Resistance rises to 1.2800.

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